How Netflix used big data and analytics to optimize his huge data
With a company valuation of over $164 billion, Netflix has surpassed Disney as the most valued media company in the world. Their success can be attributed to their impressive customer retention rate, which is 93% compared to Hulu’s 64% and Amazon Prime’s 75%. However, it’s not just their ability to retain most of their 151 million subscribers that have made them successful.
With over 115 million subscribers, there is little doubt that Netflix is the uncrowned king of the online streaming world. Netflix’s phenomenal rise to streaming dominance has taken industry leaders aback, forcing them to question- how could one single platform take on entire Hollywood? The answer is simple- Big Data.
In 2007, after the launch of its streaming service, Netflix took 6 years to collect proper data for estimating the sure success of its first original production “House of Cards”. Netflix has been setting the biggest example of the use of analytics in the right direction for spelling business success in a domain as unpredictable as content production.
How Netflix uses big data and analytics
How Netflix used big data and analytics to generate billions
Netflix is successful thanks to big data and analytics.
With a company valuation of over $164 billion, Netflix has surpassed Disney as the most valued media company in the world. Their success can be attributed to their impressive customer retention rate, which is 93% compared to Hulu’s 64% and Amazon Prime’s 75%. However, it’s not just their ability to retain most of their 151 million subscribers that have made them successful.
Netflix has flown ahead of its competitors because it also makes more successful TV shows and movies, hits like ‘House of Cards’, ‘Orange Is The New Black’, and ‘Birdbox’ have garnered a lot of attention and high viewership, driving up the rate of subscriptions. Netflix has also been more successful in identifying what their audience wants.
In 2017, 93% of original TV shows were renewed. A contrast to cable television where there is only a 35% chance of a show being renewed after the first season. What is the secret to their success? Big data and analytics.
How Netflix uses big data and analytics
So, how does Netflix use data analytics? By collecting data from their 151 million subscribers, and implementing data analytics models to discover customer behaviour and buying patterns. Then, using that information to recommend movies and TV shows based on their subscribers’ preferences.
Most significantly, Netflix collects customer interaction and response data to a TV show. For example, Netflix knows the time and date a user watched a show, the device used, if the show was paused, does the viewer resume watching after pausing? Do people finish an entire TV show or not, how long does it take for a user to finish a show and so on.
Netflix’s ability to collect and use the data is the reason behind their success. According to Netflix, they earn over a billion in customer retention because the recommendation system accounts for over 80% of the content streamed on the platform. Netflix also uses its big data and analytics tools to decide if they want to greenlight original content. To an outsider, it might look like Netflix is throwing their cash at whatever they can get, but in reality, they greenlight original content based on several touch points derived from their user base.
For example, Netflix distributed ‘Orange is the New Black’ knowing it would be a big hit on their platform. How? Because ‘Weeds’, Jenji Kohan’s previous hit performed well on Netflix in terms of viewership and engagement.
Key takeaways
Powerful analytics models can process terabytes of data to churn out meaningful information. Judicious use of data analytics is the main reason for Netflix’s success. In fact, big data and analytics are so vital to Netflix’s success that you may as well call them an analytics company instead of a media company.
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